Article by Patrick Sheen

Should I refinance my mortgage today or not ? This is the big question these days. With the current mortgage rates fluctuating the way they have over the past few months, many homeowners have been toying with this question.

However it seems that the lowest interest rates we have seen in many years have started to climb again. Just a few months ago we were seeing interest rates as low as 4.25 % however with the given unemployment rate rising, the confidence in mortgage backed securities has declined somewhat, resulting in pushing up mortgage interest rates again.

So the question remains ” Should I refinance my mortgage or not ?”

If you have missed the best opportunities to refinance when interest rates were in the 4.5 %-4.75 % ranges because you were holding out in favor of possibly getting an even lower rate, you might be regretting the decision and wondering to your self if you should go ahead and move quickly before the rates rise even more. Or you may be still holding out in hope that the rates will drop again. This is a tough decision to make, because the markets are difficult to predict. The main question is, can you still drop your rates by at least 2 points? If the answer is yes then there is still a window of opportunity to take advantage of.

There are some important factors that must be seriously considered before making applications to mortgage broker companies. Gone are the days when someone could just walk into a bank or mortgage broker and secure a loan with a 650 credit rating. This is not to say that it would be impossible to get a mortgage loan with a 625-650 rating, however, with the rates on the rise it may be difficult to secure an interest rate at under 5.5 % – 5.75%.

One of the reasons is that lenders have become much more stringent when it comes to applicant’s credit ratings and other factors that would determine a persons ability to make payments. In order to get the best rates of say, 5.21 % which is currently the lowest rates available at the time of this writing, an applicant will need to have a credit rating of 750 or more to secure the best interest rates.

Remember if you are going to be making applications with lenders, they will perform a credit check which will in turn lower your credit score. If you still want to make applications, then it is best to do them all in the same month, that way your credit score will only be affected during a one month period as opposed to being affected over several months, which will hurt your score even more.

Another thing to consider is how long you plan on living in your home. Refinancing a mortgage can be quite costly. There are penalties to breaking your current mortgage agreement, closing costs and other fees involved that can seriously eat into your potential gains. So if you plan on moving in the next seven years then it may not be in your best interest to refinance.

Banks know that statistically most homeowners live in their home of an average of 7 years only, therefore they make sure to charge most of the interest up front in the first few years of the mortgage as to make the most profit possible. Also, in order to get the most out of a refinance, it would be best if it were possible to reduce the rates by at least 2 points, again this is due to the fees and costs involved with refinancing.

One last thing, if after all consideration is done and you decide to move forward with a home refinance, make sure that you deal with a broker and not a broker bank. What’s the difference between the two ? Well a broker bank is essentially a regular bank disguised as a broker firm.

Now why would that be a problem ?

All banks in the US are exempt from RESPA laws which govern the actions of broker firms in regards to ethical practice. This means that a bank can mark up the rates without having to explain their actions. This can entail a.25% increase on what an applicant is already qualified for, which can total into thousands of dollars of extra interest payments over the course of the loan term.

A broker firm on the other hand, is held accountable for its actions and is required to remain transparent in all financial dealings with its customers. This is why you would rather use a mortgage broker firm instead of a bank.

Hopefully this will give a little bit of an insight in regards to choosing to refinance your mortgage or not at this time.